HOUSE OF LORDS
SESSION 2006–07
[2007] UKHL 23
on appeal from: [2005] EWCA Civ 1418
OPINIONS
OF THE LORDS OF APPEAL
FOR JUDGMENT IN THE CAUSE
Datec Electronics Holdings Limited and others (Respondents)
v.
United Parcels Service Limited (Appellants)
Appellate Committee
Lord Hoffmann
Lord Hope of Craighead
Lord Walker of Gestingthorpe
Lord Mance
Lord Neuberger of Abbotsbury
Counsel
Appellants:
Julian Flaux QC
Charles Priday
(Instructed by Barlow Lyde & Gilbert)
Respondents:
Matthew Reeve
Emmet Coldrick
(Instructed by Clyde & Co)
Hearing dates:
14 and 15 March 2007
ON
WEDNESDAY 16 MAY 2007
HOUSE OF LORDS
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
Datec Electronics Holdings Limited and others (Respondents) v.
United Parcels Service Limited (Appellants)
[2007] UKHL 23
LORD HOFFMANN
My Lords,
1.
I have had the privilege of reading in draft the opinion of my
noble and learned friend Lord Mance and agree that this appeal should
be dismissed.
LORD HOPE OF CRAIGHEAD
My Lords,
2.
I have had the advantage of reading in draft the speech of my
noble and learned friend, Lord Mance. I agree with it, and for the
reasons he gives I too would dismiss the appeal. I wish to add only a
few observations of my own on the first issue: was there a contract for
the carriage of goods by road within the meaning of article 1 of the
Convention on the Contract for the International Carriage of Goods by
Road (“CMR”).
3.
The reach of article 1 of CMR is very wide. It applies to every
contract for the carriage of goods by road, provided it is a contract for
reward and the place of taking over the goods and the place designated
for delivery, as specified in the contract, are situated in two different
countries of which at least one is a contracting country. The place of
residence and the nationality of the parties are irrelevant. All the
qualifications as to the kind of contract that the article contemplates are
1
met in this case. The questions are whether, in the events that happened,
the three packages that UPS’s driver uplifted from Datec’s premises in
Milton Keynes for delivery to Incoparts’ agents in Amsterdam were
being transported under a contract and, if so, whether it was a contract
of carriage. It is not disputed that, if there was a contract of carriage,
CMR applies to it.
4.
The underlying facts point strongly towards there having been a
contract between the parties of some kind. UPS’s driver presented
himself at Datec’s premises in response to a computer booking for the
transportation of the packages to Amsterdam. This was to be done in
consideration of a transportation charge for which Date was to be billed
through its account with UPS. He accepted the packages and carried
them by road to Luton. From there they continued on their journey by
air to Cologne and then on by road to Amsterdam. The essential
elements of a contract were all present. I think that the surrounding
circumstances indicate that the transaction was being undertaken on
both sides with reference to the frame work agreement which the parties
entered into on 8 March 2001. This was a standard form contract to
which terms and conditions of carriage (“the conditions”) were attached.
The problem arises, as Lord Mance has explained, because each of the
three packages exceeded the limit of value set out in clause 3(a)(ii) of
the conditions.
5.
Clause 3 of the conditions begins with these words:
“This section sets out various restrictions and conditions
which limit and govern the extent of the service UPS
offers. It also explains what the consequences are of the
shipper presenting packages which do not meet these
requirements.”
The conditions must, of course, be read as a whole. So the provisions
which follow must be read in the light of the guidance as their purpose
which is to be found in these two opening sentences.
6.
Various service restrictions and conditions are set out in para (a).
These include restrictions on the size, value and contents of packages.
Among these restrictions is para (a)(iv). It provides that packages must
not contain goods which might endanger human or animal life or any
means of transportation or which might otherwise taint or endanger
2
other goods being transported by UPS. Para (a) also makes the shipper
responsible, among other things, for the accuracy and completeness of
the particulars inserted in the waybill and for ensuring that all packages
set out adequate contact details for the shipper and receiver of the
package. A breach of the limits set by some of the restrictions and
conditions may be capable of being identified by inspection at the outset
before any carriage takes place: see para (a)(i), which relates to the
weight and size of packages. Others may not be discovered until
something happens: see para (a)(iv), which relates to packages which
may damage other goods being transported by UPS.
7.
The consequences of a failure to meet the requirements of para
(a) are set out in paras (c), (d) and (e). If it comes to the attention of
UPS that any package does not meet any of the restrictions or conditions
set out in para (a), it may suspend carriage and hold the package or
shipment to the shipper’s order: para (c)(i). It may also do this if,
among other things, it has been given an incorrect address for delivery.
The shipper is responsible for the reasonable costs and expenses of UPS
and for all claims against UPS because a package does not meet any of
the restrictions and conditions in para (a): para (d). UPS is not liable for
any losses which the shipper may suffer arising out of UPS’s carrying
packages which do not meet the restrictions and conditions set out in
para (a): para (e).
8.
The service which UPS offers is an express package and
document service which is designed to handle high volumes with the
minimum of delay and inconvenience to customers. The commercial
purpose of the framework agreement is to allocate responsibility
between the parties in events which may be expected to happen in
contracts of that kind. Two situations are contemplated by clause 3(c),
which is headed “refusal and suspension of carriage”. To these a third
must be added, which is this case. The first is where the fact that
package does not meet any of the restrictions or conditions comes to the
attention of the driver at the outset before it is accepted for carriage by
UPS. In this situation UPS may “refuse to transport” the package. The
second is where this fact comes to the attention of UPS after carriage
has begun and while the package is still in transit. In this situation UPS
may “suspend carriage”. The third is where carriage has begun and the
fact does not come to the attention of UPS until the package is lost or
damaged before or at the point of delivery.
9.
In the first situation there is no contract. The package does not
meet the terms of UPS’s offer, so UPS is entitled not to accept it. In the
3
second and third situations, however, I do not think that it can be said
that there was no contract. The package has been handed over and
accepted, and it is being or has been carried. The conditions explain
how the transaction is then to be regulated. In the case of suspension,
the package is held for the shipper’s order and may be returned to the
shipper at the discretion of UPS: para (c)(iii). In the case of suspension
or where loss or damage occurs, UPS is relieved of any liability to the
shipper by para (d). The fact that the conditions are designed to deal
with these situations indicates that a transaction which gets this far falls
within the contract of carriage and is regulated by it. It is, of course,
obvious that the conditions cannot mean one thing when they are
applied to domestic carriage and other when they are applied to carriage
which is international. I would have expected UPS to have wished to
take advantage of the conditions if the carriage which was being
undertaken was internal to the UK. It is the disadvantage that flows
from the application of CMR that lies behind the contention that there
was no contract of carriage in this case.
10.
In the result I would construe the conditions in the framework
agreement in this way. If UPS is made aware at the outset that a
package that it is asked to carry does not meet any of the restrictions or
conditions, it may refuse to accept it. The framework agreement permits
it to do this. There is no contract of carriage. But if UPS accepts the
package and the undertaking to transport it is performed to any extent,
there is a contract of carriage. This is what the framework agreement
itself contemplates, and its actions must be taken to be referable to a
contract of carriage that has been made under it. The consequences are
those which the framework agreement sets out, as modified by CMR if
the contract is one to which article 1 of CMR applies.
LORD WALKER OF GESTINGTHORPE
My Lords,
11.
On the first issue in this appeal I am in full agreement with the
reasoning and conclusions of my noble and learned friends Lord Hope
of Craighead and Lord Mance, whose opinions I have read in draft.
12.
On the second issue (the judge’s conclusion that wilful
misconduct had not been proved on the balance of probabilities) I feel
4
real doubt whether the Court of Appeal had sufficient grounds for
reversing the trial judge, who had the advantage of seeing and hearing
the witnesses. He set out his findings fully and clearly and nothing in
his judgment suggests to me that he failed to make full use of that
advantage. In principle there are clear distinctions between findings of
primary fact, factual inferences and the evaluation of factual matters, but
in practice they often start to run into one another. An appellate court
should be cautious about differing from the trial judge in any of his
findings, for the reasons explained by my noble and learned friend Lord
Hoffmann in a passage in Biogen Inc v Medeva Ltd [1997] RPC 1, 45
which is so well known as not to need repetition.
13.
But I do not think it necessary to press my doubt to the point of
dissent. I too would dismiss this appeal.
LORD MANCE
My Lords,
Introduction
14.
This appeal raises, first, a legal issue of general interest relating
to the Convention on the Contract for the International Carriage of
Goods by Road (“CMR”), scheduled to the Carriage of Goods by Road
Act 1965 and, secondly, a factual issue on which the courts below have
differed. The appellants, United Parcels Service Limited (“UPS”),
perform a parcels delivery service on a worldwide basis. On Thursday,
25 July 2002, the first respondents, Datec Electronics Holdings Ltd
(“Datec”), as consignors handed over to UPS in Milton Keynes three
packages of Pentium IV computer processors, with a view to their
delivery next morning to L & A Freight BV (“L&A”), as agents for the
second respondents, Incoparts BV (“Incoparts”), in Amsterdam. The
packages reached UPS’s hub (or feeder) premises in Amsterdam, but the
judge, Andrew Smith J, found that they were never delivered to L&A.
15.
The issue of law arises because the packages were carried
partway by road internationally. UPS took them first by road to Luton
Airport, then by air to Cologne (apparently by UPS’s own cargo service)
and from there by road to Amsterdam. The leg between Cologne and
5
L&A in Amsterdam is international carriage within the potential scope
of CMR. The respondents’ primary claim is that CMR applied to this
leg, that UPS is liable for the loss of the packages during this leg under
article 17(2) and that the probable cause of loss was wilful misconduct
by UPS or its agents or servants within article 29, displacing the
limitation of liability otherwise available to UPS under article 23(3) of
CMR.
16.
UPS rely in response on their standard terms and conditions
(which I shall for convenience call “UPS’s conditions”). These were
incorporated in an umbrella or framework agreement which Datec and
UPS made on 8 March 2001 to regulate their frequent dealings. Further,
when making the computer booking for this particular consignment on
25 July 2002, Datec had to click on a box expressly confirming
acceptance of UPS’s conditions. Under such conditions UPS sought to
ensure that it did not carry any individual package worth more than
US$50,000. The three packages each had a value well in excess of that
limit. Their total value was US$377,856. The processors were stored
within them in eight smaller boxes – two boxes in one package which
weighed 17kg, and three boxes in each of the other two packages which
each weighed 25kg. Each box had a value of US$47,232.
17.
In these circumstances, UPS’s case is that that there was never
any contract at all relating to the three packages or that, if there was, it
was not a contract for carriage. On the former analysis, UPS accept that
they were bailees, but invoke exemptions in their conditions as the terms
of the non-contractual bailment. On the latter analysis, they maintain
that there was a contractual bailment on the terms of the same
exemptions. The respondents deny that UPS’s standard conditions have
either alleged effect. If that be wrong, however, they submit that nothing
in UPS’s conditions exempts UPS from liability for the loss which
occurred.
18.
On the issue whether CMR applied, the respondents succeeded
both before the judge, Andrew Smith J: [2005] 1 Lloyd’s Rep 470, and
before the Court of Appeal (Brooke V-P and Sedley and Stephen
Richards LJJ: [2006] 1 Lloyd’s Rep 279). The factual issue then arose
whether the respondents had discharged the burden on them of
establishing wilful misconduct under CMR. The judge held that they
had not. The Court of Appeal disagreed and held UPS liable for the full
amount of the respondents’ loss. Against this decision, UPS no w appeal.
I wish to express my appreciation for the quality of the written and oral
submissions on both sides in what may, for its subject-matter, be
6
regarded as an unusually difficult case. I take the two broad issues in
turn.
The contractual issue
19.
UPS’s conditions provide as follows:
“UPS TERMS AND CONDITIONS OF CARRIAGE
1
Introduction
A
These terms and conditions (‘terms’) set out the
basis on which United Parcel Service (‘UPS’) will
transport packages, letters and freight (‘packages’). These
terms are supplemented by the service details appearing in
the current applicable UPS Service and Tariff Guide (‘the
Service and Tariff Guide’) relating to the particular service
the shipper has chosen. The Service and Tariff Guide
contains important details about the services of UPS which
the shipper should read and which form part of the
agreement between UPS and the shipper.
B
Where carriage by air involves an ultimate
destination or stop outside the country of origin the
Warsaw Convention may apply .…. Notwithstanding any
clause to the contrary, international carriage by road may
be subject to the provisions of the Convention on the
Contract for the International Carriage of Goods by Road
signed at Geneva on 19 May 1956 (‘the CMR
Convention’).
C
Depending on the country where the shipment is
presented to UPS for carriage, the terms ‘UPS’ will mean
and the shipper’s contract will be with whichever of the
following companies is applicable. That company will
also be the (first) carrier of the goods for the purposes of
the Conventions referred to in paragraph B.
UK – UPS Limited; …..
D
UPS may engage sub-contractors to perform
services and contracts both on its own behalf and on
behalf of its servants, agents and sub-contractors each of
whom shall have the benefit of these terms.
In these terms, ‘Waybill’ shall mean a single UPS
waybill/consignment note or the entries recorded against
the same date, address and service level on a pick-up
record. All packages covered under a Waybill shall be
7
considered a single shipment. A shipment may be carried
via any intermediate stopping places that UPS deems
appropriate.
2
Scope of Service
Unless any special services are agreed, the service to be
provided by UPS is limited to the pick up, transportation,
customs clearance where applicable and delivery of the
shipment. The shipper acknowledges that shipment will
be consolidated with those of other shippers for transport
and that UPS may not monitor the inbound and outbound
movement of individual shipments at all handling centres.
3
Conditions of Carriage
This section sets out various restrictions and conditions
which limit and govern the extent of the service UPS
offers. It also explains what the consequences are of the
shipper presenting packages for carriage which do not
meet these requirements.
(a)
Service Restrictions and Conditions
UPS does not offer carriage of packages which do
not comply with the restrictions in paragraphs (i) to
(iv) below.
(i)
Packages must not weigh more than 70
kilograms (or 150 lbs) or exceed 270
centimetres (or 108 inches) in length or a
total of 330 centimetres (or 130 inches) in
length and girth combined.
(ii)
The value of any package may not exceed
the local currency equivalent of USD
50,000.
In addition the value of any
jewellery, other than costume jewellery, in a
package shall not exceed the local currency
equivalent of USD 500.
(iii) Packages must not contain any of the
prohibited articles listed in the Service and
Tariff Guide including (but not limited to)
articles of unusual value (suc h as works of
art, antiques, precious stones, stamps, unique
items, gold or silver), money or negotiable
instruments (such as cheques, bills of
exchange, bonds, savings books, share
certificates or other securities) and
dangerous goods.
(iv) Packages must not contain goods which
might endanger human or animal life or any
8
means of transportation, or which might
otherwise taint or damage other goods being
transported by UPS, or the carriage, export
or import of which is prohibited by
applicable law.
The shipper shall be responsible for the accuracy and
completeness of the particulars inserted in the Waybill and
for ensuring that all packages set out adequate contact
details for the shipper and receiver of the package and that
they are so packed, marked and labelled, their contents so
described and classified and are accompanied by such
documentation as may (in each case) be necessary to make
them suitable for transportation and to comply with the
requirements of the Service and Tariff Guide and
applicable law.
(b)
Perishable and temperature sensitive goods will be
transported provided that the shipper accepts that
this is at its risk. UPS does not provide special
handling for such packages.
(c)
Refusal and Suspension of Carriage
(i)
If it comes to the attention of UPS that any
package does not meet any of the above
restrictions or conditions or that any COD
amount stated on a COD Waybill exceeds
the limits specified in paragraph 8, UPS may
refuse to transport the relevant package (or
any shipment of which it is a part) and, if
carriage is in progress, UPS may suspend
carriage and hold the package or shipment to
the shipper’s order.
(ii)
UPS may also suspend carriage if it cannot
effect delivery at the third attempt, if the
receiver refuses to accept delivery, if it is
unable to effect delivery because of an
incorrect address (having used all reasonable
means to find the correct address) or because
the correct address is found to be in another
country from that set out on the package or
Waybill or if it cannot collect amounts due
from the receiver on delivery.
(iii) Where UPS is entitled to suspend carriage of
a package or shipment, it is also entitled to
return it to the shipper at its own discretion.
(d)
The shipper will be responsible for the reasonable
costs and expenses of UPS (including storage), for
9
(e)
(f)
such losses, taxes and customs duties as UPS may
suffer and for all claims made against UPS because
a package does not meet any of the restrictions or
conditions in paragraph (a) above or because of any
refusal or suspension of carriage or return of a
package or shipment by UPS which is allowed by
these terms. In the case of the return of a package
or shipment, the shipper will also be responsible for
paying return transport charges calculated in
accordance with the prevailing commercial rates of
UPS.
UPS will not meet any losses which the shipper
may suffer arising out of UPS carrying packages
which do not meet the restrictions or conditions set
out in paragraph (a) above and, if UPS does
suspend carriage for a reason allowed by these
terms, the shipper shall not be entitled to any refund
on the carriage charges it has paid.
UPS reserves the right, but is not obliged, to open
and inspect any package tendered to it for
transportation at any time.
……
9
Liability
9.1
Where the Warsaw or CMR Conventions or any
national laws implementing or adopting these
conventions apply (for convenience referred to as
Convention Rules) or where (and to the extent that)
other mandatory national law applies, the liability
of UPS is governed by and will be limited
according to the applicable rules.
9.2
Where Convention Rules or other mandatory
national laws do not apply, UPS will only be liable
for failure to act with reasonable care and skill and
its liability shall be exclusively governed by these
terms and (save in the case of personal injury or
death) limited to proven damages of:
(a)
£75 … per shipment, or
(b)
if greater, £10 … per kilo of the goods
affected up to a maximum per shipment of
the local currency equivalent of USD5,000
unless a higher value has been declared by the
shipper under paragraph 9.4 below.
…..
10
9.4
…..
15
Subject to the provisions of paragraph 9.5, UPS
operates a facility for the shipper to obtain for a
shipment the benefit of a greater limit of liability
than UPS provides under paragraph 9.2 above or
than is provided by Convention Rules or other
mandatory national law. The shipper may use this
facility by declaring a higher value on the Waybill
and paying an additional charge as stated in the
Service and Tariff Guide. The value of the goods
concerned shall not in any event exceed the limits
specified in paragraph 3(a)(ii).
Governing Law
These terms and any contract concluded which
incorporates these terms shall in all respects be
governed by the laws of the country where the
shipment is presented to UPS for carriage.”
20.
UPS’s Service and Tariff Guide, referred to in clause 1A of
UPS’s conditions, contains further references to the $50,000 restriction.
Under the heading “Sending and receiving shipments. Declared value
charge for insurance”, the Guide mentions the facility to increase the
limit of UPS’s liability by declaration, but adds that “The value of the
goods concerned should not however in any event exceed US$50,000
(US$500 in the case of jewellery other than costume jewellery) …. as
UPS does not offer carriage for goods with values above these
amounts”. A later provision headed “Service restrictions” reads: “The
maximum value or declared value per package is US$50,000 ….”. A
further statement headed “Prohibited articles” lists various articles as
“prohibited from shipment to all countries” including “Articles of
exceptional value (e.g. works of art, antiques, precious stones, gold and
silver)” and “Dangerous goods/Hazardous materials”.
21.
There was originally common ground on the pleadings that UPS
had entered into a contract for the carriage of the three packages of
processors. But, by amendment at the trial, UPS pleaded that under their
conditions they did not offer, and so had never agreed, to carry these
packages, which were accordingly not “goods” for the purposes of
CMR. The amendment was permitted on the basis that it involved no
new allegations of fact. The judge emphasised the limited ambit of the
new argument [2005] 1 Lloyd’s Rep 470, para 116:
11
“ ….. it is directed only to the effect of the UPS terms. No
argument was advanced about the authority of any person
making a contract on behalf of UPS, nor was it said that a
contract was vitiated for mistake on UPS’s part, nor that
the contract should be rescinded for misrepresentation
(although UPS do plead that the claimants and T&B
misrepresented that the packages were in compliance with
the UPS terms and that otherwise UPS would not have
carried them).”
22.
The first issue is ultimately a short one. Under section 1 of the
Carriage of Goods by Road Act 1965, the provisions of CMR have the
force of law
“so far as they relate to the rights and liabilities of persons
concerned in the carriage of goods by road under a
contract to which the Convention applies”.
Article 1 of CMR states:
“This Convention shall apply to every contract for the
carriage of goods by road in vehicles for reward, when the
place of taking over of the goods and the place designated
for delivery, as specified in the contract, are situated in
two different countries, of which at least one is a
Contracting country, irrespective of the place of residence
and the nationality of the parties”.
Here, UPS had discretion as to the route and means (cf clause 1D of
their conditions), and they chose to perform as an international road
carrier between Cologne and the final destination in Amsterdam. The
$50,000 question apart, it is common ground that CMR would apply as
between UPS and the respondents to the international road carriage
which UPS was entitled, and chose, to undertake: cf Quantum Corpn
Inc. v. Plane Trucking Ltd. [2002] EWCA Civ 350; [2002] 2 Lloyd’s
Rep 25. Whether CMR in fact applied thus depends on whether there
was any “contract for the carriage” of these packages from Milton
Keynes to Amsterdam.
12
23.
The umbrella agreement did not cover the despatch of particular
packages - indeed it did not oblige Datec to despatch any packages at
all. In the case of packages conforming to UPS’s conditions, a contract
for carriage would come into existence either when a shipment was
booked by computer or at latest when it was collected pursuant to such a
booking. That some form of contract was intended by UPS’s conditions
even in respect of packages not meeting UPS’s restrictions seems clear.
The “consequences” of a shipper presenting non-conforming packages
for carriage were stated to involve rights on the part of UPS to suspend
carriage (clause 3(c)(i) and (ii)), to retain any carriage charges paid
(clause 3(e)) and to open and inspect any package tendered to it for
transportation (clauses 3(c)(i) and (ii) and (f)). The conditions also
include a positive obligation on the part of the shipper to be responsible
for costs and expenses, for losses, taxes and customs duties suffered and
for claims made against UPS because of the non-compliance (clause
3(d)). This last is an obligation which one can well envisage UPS
wishing to be able enforce against a shipper – for example, in the case of
dangerous goods damaging other goods or damaging the carrying
vehicle itself, or in the case of goods prohibited for import, which
resulted in UPS incurring a customs penalty or costs. The critical
question is to my mind whether the contract was for carriage subject to
such rights and obligations, or was for some form of bailment capable of
conversion into a contract for carriage only if UPS discovered the nonconformity and decided to proceed with, rather than suspend, the actual
carriage.
24.
Short though the issue is, it is not an easy one. But I have come to
the conclusion that the courts below were correct. I would adopt the
reasons given succinctly by Andrew Smith J in paras 118-119 of his
judgment, when he said:
“118. …. I acknowledge that paragraph 3 of the UPS
Terms refers to restrictions upon the service that UPS
‘offers’, and to a lawyer this terminology has connotations
of the rules about contracts being concluded through an
offer and acceptance, and of the need for them to
correspond. However, the issue is about the meaning of
the UPS terms in a commercial contract made between
businessmen, and they are to be interpreted in that
context. I consider that UPS’s submission places too
much weight upon the reference to what UPS ‘offers’, and,
more importantly, the UPS terms expressly state that
paragraph 3 explains the consequences of the shipper
presenting packages that do not meet UPS’s restrictions
13
and conditions. The paragraph does not explain that there
will be no contract of carriage if such a package is
presented and accepted: on the contrary, sub-paragraph (c)
provides that the effect of the shipper presenting a package
that does not meet the restrictions is that UPS have the
right to refuse to carry it or, if carriage is in progress, to
suspend carriage. The implication is that unless and until
UPS exercise their right, there is a contract that UPS will
carry the package. It does not seem to me that UPS’s
argument is assisted by paragraph 9.4: that provision is
directed to placing a limit upon the value that a shipper
may declare under a waybill. Nor, in my judgment, does
the Guide provide any support for UPS’s argument: it
reflects the UPS terms in referring to ‘Prohibited articles
and Service restrictions’, but it does not purport, as the
UPS terms do, to stipulate the consequences if the shipper
does not observe those restrictions.
119. I consider that this interpretation of the UPS terms is
in accordance with commercial reality and the business
expectations of the parties. After all, UPS’s argument
would, I think, apply by parity of reasoning even if the
consignor and UPS were both unaware that the
consignment contained a package worth more than
US$50,000 and understood that the consignment complied
with the UPS terms.”
25.
To these reasons, I would add that the assumption behind the
concluding words of clause 3(e) is that, where carriage occurs without
the non-conformity being detected or the carriage being suspended,
carriage charges are without more due contractually. An argument that
they are due as reward for carriage inadvertently performed under a
bailment which was not for carriage seems to run into the commercial
unreality which the judge had in mind in para 119. To the case of mutual
ignorance which the judge postulated in the second sentence of para
119, one may also add that many situations can be conceived in which
there was room for disagreement or mistake about whether some of the
restrictions applied. Differences of view or mistakes could well arise as
to whether articles were of “unusual value” or “might …. taint or
damage other goods being transported by UPS”. Finally, it is material to
note that clause 3 regulates some situations where there is on any view a
contract for carriage: cf the concluding sentence of clause 3(a), clause
3(b), clause 3(c)(ii) read with (iii) and the last words of clause 3(e) as
well as clause 3(f). The more natural inference is, in my view, that the
whole of clause 3 provides a contractual regime governing carriage of
non-conforming goods.
14
26.
It is well to remember that, in many circumstances, particularly in
cases of domestic carriage and carriage not subject to mandatory rules,
this conclusion, and the first issue, would not be significant. There
would be no problem about UPS restricting its liability, whether or not
there was a contract for carriage. Whether clause 3(e) would be
sufficient to do this is a different matter. Mr Reeve for the respondents
submitted that it would not be, because loss by failure to take due care
or worse cannot be regarded as loss “arising out” of UPS carrying nonconforming packages. The word “loss” was not amplified by the usual
phrases to embrace loss caused “howsoever” or by negligence, still less
by employee misconduct or theft (cf Canada Steamship Lines Ltd. v.
The King [1952] AC 192, 208, per Lord Morton). However, I would
reserve any opinion on the correctness of Mr Reeve’s submission, at
least in relation to loss or damage by negligence, in circumstances
where, under clause 9.2 and apart from situations governed by
Convention or mandatory national rules, UPS would not anyway be
liable except for negligence. I should mention that Mr Flaux QC
representing UPS disclaimed any submission that clause 9.2 could apply
if there was no contract for carriage. UPS’s argument that there was no
contract for carriage of the three packages was aimed solely at invoking
clause 3(e).
27.
UPS’s difficulties in relying on clause 3, if there was a contract
for carriage of the three packages, arise from the application to
international carriage of the Warsaw Convention in the case of air
transport and (more pertinently in this case) of CMR in the case of road
transport. These Conventions regulate the liability of international
carriers by air and road for loss of or damage or delay to goods in terms
from which no derogation is permissible: cf in particular Chapters IV
and VII of CMR. For the benefit of carriers, they also include certain
exclusions and strict limits on the extent of liability (8.33 units of
account, about £10, per kilogram in the case of CMR: article 23(3)); and
these apply in relation to extra-contractual as well as contractual claims
against the carrier, its servants and agents and others of whose services
the carrier makes use: article 28(1) and (2). In most situations, therefore,
the application of the CMR regime to the carriage of non-conforming
packages would not expose UPS to unlimited exposure. But the CMR
exclusions and limits are not available if the claimant is able to prove
wilful misconduct or its equivalent: article 29(1). The carrier is then
exposed to unlimited liability. Hence, in the present case, UPS’s concern
to establish that CMR is inapplicable.
28.
Exposure to unlimited liability in respect of wilful misconduct of
its servants or agents is not normally a matter in respect of which a
15
carrier can expect sympathy. But a carrier is entitled to refuse to carry
particular goods or to require the shipper to give an undertaking as to the
nature or qualities of goods which it agrees to carry. A carrier who
unwittingly receives and carries goods which do not comply with stated
restrictions is unlikely to be the ordinary carrier whom the drafters of
CMR had in the forefront of their mind. It is relevant to consider
whether the fact that goods did not conform to the carrier’s restrictions
retains any relevance if CMR applies. There are various ways in which
it might do so, some of them discussed before the judge.
29.
First, if the non-conforming nature of the goods (e.g. excess
weight) itself led to damage to the goods themselves, this could be
relevant under article 17(2) of CMR both to show that the damage
occurred through circumstances which the carrier could not avoid and,
quite possibly, to show that it was caused by wrongful act or neglect of
the claimant. In the present case, UPS advanced before the judge the
more ambitious contention that the loss was caused by wrongful act or
neglect of the respondents through despatching goods worth more than
US$50,000. The judge at para 127 was not persuaded that the despatch
of excess-value packages was a “wrongful act” by Datec, and he did not
regard it as necessary or permissible to interpret the contract as
containing an implied undertaking not to despatch such packages. I have
considerable doubts about this part of the judge’s reasoning. But the
judge also rejected UPS’s contention for the more persuasive reason that
the excessive value of the packages did not in any way cause the loss.
The packages were not, in other words, lost because of their individual
value (although, as will appear, they may well have been targeted
because of the value of their contents). The judge further found that, had
Datec not ignored the package value restriction, it could and would in
any event have despatched the contents of the packages (that is the eight
boxes each having a value of less than US$50,000) as separate packages
via UPS.
30.
Article 41 of CMR renders null and void “any stipulation which
would directly or indirectly derogate from the provisions of this
Convention”, adding that “the nullity of such a stipulation shall not
involve the nullity of the other provisions of the contract”. So far as the
first part of clause 3(e) of UPS’s conditions purports to remove liability
for loss, damage or delay which UPS would otherwise incur under
article 17 of CMR, clause 3(e) is null and void. But CMR does not
supersede all aspects of the contractual or legal relationship between a
carrier and those contracting for the carrier’s services. It is at least
arguable that clause 3(d) of UPS’s conditions would enable UPS to
cross-claim, against those contracting for UPS’s services, in respect of
16
any excess exposure over and above US$50,000 per package which UPS
could show that they only incurred as a result of the shipment of nonconforming packages. Before the House, the possibility that there might
be or have been some relief based on an implied misrepresentation or
misstatement of the characteristics of the packages being despatched
was also raised. The limited scope of the first issue (cf paragraph 21
above) means that the validity of these arguments has not been tested.
But, if they are not sound, the harsh, but clear-cut position will be that,
where a carrier contracts unwittingly to carry non-conforming goods and
chooses to perform internationally by road, CMR applies with its
benefits and burdens, and that the carrier’s restrictions will be relevant
only if and in so far as they may assist the carrier to avoid liability under
article 17(2).
31.
I would therefore reject UPS’s challenge to the application of
CMR to the carriage of the three packages. The issue of wilful
misconduct thus arises for consideration.
Wilful misconduct
32.
Some further facts need stating. The three packages bore barcode
labels with separate identification numbers. These labels were all twice
scanned at about 7.30 a.m. on Friday, 26 July 2002 shortly after the
packages arrived at UPS’s hub premises in Amsterdam. The hub
premises consisted of a yard surrounded by a 3 metre fence with one
pedestrian and two vehicular gates. Inside the yard was a large secure
warehouse, with gates on one side against which incoming vehicles
reversed in such a way as to make it “virtually impossible” for anyone to
enter or leave the warehouse along either side of the vehicles. Short
feeder conveyors were extended into the backs of incoming vehicles,
and staff called “unloaders” used these to discharge packages to a main
conveyor belt inside the shed. The barcodes were scanned first on
“import” and then, on reaching the main conveyor belt, as “out for
delivery”. Staff called “splitters” manually directed packages off the
main conveyor onto one of two conveyor belt spurs, alongside each of
which between five and perhaps ten loading vehicles destined for
different delivery areas were backed up. Packages were unloaded from
the spurs either by the driver for the relevant vehicle or by “preloaders”. Loading was a quick operation giving very little time to assess
what packages contained or their value (although Mr van Beusekom of
UPS said in his written statement that a driver loading his own vehicle
“might have more of an opportunity to assess” such matters). Loaded
vans left the warehouse through roll-doors opened by “proximity” card.
17
The vans had automatic locks on the doors between the cabin and their
rear, as well as padlocks to their rear doors. Drivers were instructed to
apply these padlocks whenever they left the van, including when making
a delivery. Drivers carried a electronic “DIAD” board to obtain the
recipient’s signature for each package delivered. The information on
each DIAD board was down-loaded to UPS’s mainframe computer each
day. Any package not delivered should have been returned by the driver
to the hub, where it should on “import” have been scanned and then
placed in a secure “overgoods” area inside the warehouse, for
identification and delivery as appropriate as soon as possible. There was
some, but not complete, CCTV coverage inside the warehouse.
33.
L&A’s premises were in the Schiphol South East area about 15
km from the UPS hub. On 26 July 2002 the van due to make deliveries
there was driven by a Mr Kadim. The last recorded sighting of the three
packages was by a UBS employee, Mr Kharbouche, at the hub. He saw
the packages stacked behind Mr Kadim’s vehicle and checked their
barcodes to make sure that they had been correctly sorted. But Mr van
Beusekom, gave evidence that this did not mean that the packages were
necessarily loaded into Mr Kadim’s van. Being large packages, they
might have been stacked there for stowage in an accessible part of the
vehicle, or because there was no space for them on the vehicle, or in
order to be loaded onto another vehicle.
34.
Mr Kadim delivered only one package not the subject of these
proceedings to L&A on the morning of 26 July 2002. By about mid-day,
L&A were complaining of non-delivery of the three packages. L&A
later also complained of non-delivery of a fourth package consigned by
Datec to L&A as agents for Axxis Hardware BV (“Axxis”). UPS started
their enquiries as soon as L&A complained about the missing three
packages. Mr Kadim was telephoned on the evening of 26 July. He told
UPS to contact their other drivers, some of whom, he said, had taken
packages from his lorry. At trial, UPS did not call any evidence about
the outcome of any such enquiries.
35.
On Sunday, 26 July 2002 Mr Kadim flew back to his country of
birth, Morocco. He already had a poor attendance record, and, when he
did not appear for work on Monday, 29 July, UPS issued a notice
dismissing him. Mr Kadim returned to Holland in late September 2002.
After being informed by a friend that the police were looking for him, he
went to the police, and in interview explained that he had gone to
Morocco as a result of an urgent call from his mother at 11.30 p.m. on
Friday, 26 July informing him that his father had been seriously ill. He
18
said that he “did not think it necessary to notify” UPS that he was in
Morocco because he “knew that [his] contract was not going to be
extended”. He said that his van had been loaded on 26 July by preloaders, Sebastian (Roux) and Rob (Wiegant), and repeated that other
drivers – three, whose names he did not know - had on 26 July taken
parcels from his lorry to deliver themselves. Asked how he knew what
was on his lorry and where to go, he said that he would look to see just
before he set out, but that “since I no longer have the Sloterdijk route, I
no longer know my way around very well”. The evidence is that the
Sloterdijk route had been his regular route, and he was not the regular
driver for the Schiphol South East route which he was due to take on
26 July 2002. Mr van Beusekom’s inspection of the CCTV footage and
enquiries of the pre-loaders, Mr Roux and Mr Wiegant, yielded nothing
relevant or abnormal. The loading of Mr Kadim’s van could not be
directly observed on the footage and Mr van Beusekom was not aware
what the three packages looked like.
36.
The judge had to consider whether the three packages, and so far
as relevant the Axxis package, had been delivered to L&A. He was
satisfied that they had not been. No DIAD signature existed for any of
the packages except the fifth package which Mr Kadim did deliver, and
it was improbable that the relevant barcodes had (all) been damaged in
their pouches or become illegible. The nature of L&A’s premises and
procedures added to the unlikelihood of any loss occurring after delivery
to L&A. The judge’s finding of non-delivery was not appealed before
the Court of Appeal or therefore the House.
37.
On the basis that there was non-delivery, the judge turned to
consider the likelihood of theft by an employee of UPS. Mr van
Beusekom’s evidence was that the hub had lost only eighteen packages
due to theft between 1998 and 2002, with “17 of them being lost to a
crime ring that was broken in March 2001”, and that UPS’s security
systems were sound and UPS’s approach to theft that it was always
prosecuted. He also said that the hub lost 41 packages in July 2002
alone, an average of around 1 in every 2712 packages handled, and gave
various possible explanations as to how packages could go missing
“inexplicably” (as the judge put it). They included delivery without any
record being made, mis-delivery and theft from a van on its rounds. So
far as Mr van Beusekom in his witness statement expressed opinions as
to what might have happened to the three packages, Mr Reeve did not
cross-examine, taking the view that this was a matter for the experts
called on either side (and the judge in a comment during crossexamination endorsed this approach).
19
38.
Experts were called and examined on both sides, Mr Holmes for
the respondents and Mr Heinrich-Jones for UPS. But it was for the judge
to decide whether, in the light of all the evidence, any and if so what
probable cause of loss could be determined. In the event, the judge
found their evidence “of limited value”. He went on
“inevitably, they had formed their views on the basis of
the material put before them, … whereas I must assess the
evidence presented at trial. Although their information
apparently largely coincided with the evidence, it was not
entirely the same and in these circumstances I hesitate to
place great weight upon their opinions.” (paragraph 13)
The judge said later (in para 57):
“57. Both expert witnesses agreed the paucity of evidence
is such that it is difficult to say how the three packages
came to be lost. Mr Heinrich-Jones concluded that, while
it was possible that they were stolen by, or with the
assistance of, an employee of UPS, it is impossible to
conclude that that is the most likely cause of the loss. Mr
Holmes thought it most likely that the packages were
stolen by Mr Kadim or another UPS employee but his
opinion was properly guarded: indeed, in crossexamination he acknowledged that he could not say that
this was ‘the probable cause of the loss’”.
39.
So far as the last sentence is relevant, I do not regard it as an
accurate summary of the effect of Mr Holmes’ evidence under crossexamination on 18 November 2004 (transcript pp. 76-80 and 85).
Mr Holmes went on to make clear that he believed that he had said that
the probable cause was theft by Mr Kadim or another UPS employee
and that this was indeed both “highly likely” and the probable cause,
although “one cannot be 100% certain”. He was also plainly, and
rightly, unhappy about being asked to decide questions on a balance of
probabilities which he understood were “for the court to decide”.
40.
Mr Julian Flaux QC for UPS stressed in his submissions that,
based on an original list by Mr Heinrich-Jones, the experts had in a joint
memorandum identified a range of 17 possibilities, grouped under four
headings: (I) Misplaced, (II) Delivery Issues, (III) Labelling Issues and
20
(IV) Theft. Two such possibilities, “Delivered but no proof of delivery”
under head II and “Bar code problems” under head (III) . fall out of the
picture in the light of the judge’s finding that the pac kages were not
delivered to L&A. There is nothing in Datec’s or UPS’s documentation
or in the course of known events to suggest any likelihood of the
remaining possibilities listed as “Labelling Issues” under head III, that is
Incorrectly labelled, Incorrectly addressed or Over labelled. This is
particularly so when (a) it would be a remarkable coincidence if three or
four packages due for delivery to the same place all went astray on
26 July 2002 for such a reason, (b) all four packages were satisfactorily
scanned both on import and as “out for delivery” at UPS’s hub on the
morning of 26 July 2002, and (c) Mr Kharbouche checked the labels on
the three packages and found them visually in order just before they
were due for loading on 26th July. Two possibilities under head IV
(Theft by UPS Delivery Driver and by Unknown UPS Employee)
involve wilful misconduct. The remaining possibilities listed under head
IV were Third party theft from the hub, Theft following forcible entry,
In transit theft from delivery vehicle and Theft by deception.
Mr Heinrich-Jones considered that the security and operations at the hub
effectively precluded the first two, that the third could not be eliminated
as one of the likely causes of the loss, and that the last (in the form of
deception persuading the driver to deliver the packages to unconnected
third parties) was “possible”. However, as he observed, there was no
DIAD signature to suggest that Mr Kadim or any other driver was
innocently deceived into any such mis-delivery. There was also no
positive support for the possibility of theft from the delivery vehicle
without the complicity of the driver. Even if one confines attention to
the three packages (and the loss of the Axxis package would involve a
remarkable coincidence, if due to some entirely different cause to that
causing the loss of the three packages), an untargeted, adventitious theft
of three heavy packages during an unguarded moment would be
unlikely. It is far more likely, as Mr Heinrich-Jones recognised in
paragraph 6.78 of his report, that any theft “would be a clear example of
theft of high value targeted items”. But, if these packages were targeted,
it is also highly likely that there was collaboration or information as to
their movement from within UPS. Consistently with this, the judge
accepted (at paragraph 59) that “if they were stolen, it is probable that an
employee of UPS was responsible for the theft”.
41.
The judge concluded that the probable cause of loss was not theft,
but was accidental, so falling within one of the three possibilities give n
as under head I, Misplaced (viz Missorted, Mislaid or Damaged then
thrown away) or within one of the remaining two possibilities under
head II, Delivery issues (viz Failed delivery, Mis-delivery or Delivered
in error). He said, [2005] 1 Lloyd’s Rep 470, 481:
21
“65. Once it is recognised that there are grounds to think
that the packages might well not have been loaded in
Mr Kadim’s vehicle, but set aside with a view to being
delivered by another driver, it seems to me that the
claimants’ argument that the packages were stolen by an
employee of UPS loses much of its force. Of course, it is
possible that they might have been stolen from the hub and
never loaded on a delivery vehicle, but, although
Mr Holmes described the hub as ‘fertile ground for
potential thieves among the employees’, it does not seem
to me that it would have been at all easy to smuggle such
large packages out of the hub building. Again, it is
possible that another driver loaded the packages and stole
them from his van, knowing that there wo uld be no record
that they were loaded on it, but there is no evidence
indicating this. It would have been extraordinary risky for
another driver to plan such a theft: to offer to carry the
valuable parcels to assist Mr Kadim with a delivery in
Schipol South East and then to steal them. If, on the other
hand, another driver had the goods for delivery by chance
and stole them opportunistically, he was remarkably lucky
either to be able to infer their value from the L&A address
or to happen upon such valuable goods.
66. Having considered how the goods might have
disappeared as a result of theft to which an employee of
UPS was party, it seems to me more likely that they were
lost accidentally: that, for example, the packages were
delivered to the wrong address by a driver other than
Mr Kadim; or that they were put into the hub’s
‘overgoods’ either because they were returned by a driver
who had failed to deliver them and they went astray, or
because they were for some reason never loaded in any
delivery vehicle.”
42.
Richards LJ gave the principal judgment in the Court of Appeal
with which Brooke LJ agreed: [2006] 1 Lloyd’s Rep 279. Richards LJ
summarised the criticisms made of the judge’s approach by Mr Reeve in
his submissions as follows, at p 295:
“55. [The claimants’ submission is that] the judge asked
himself the right question at para 59, namely ‘whether the
claimants have shown that theft by a UPS employee is
more likely than accidental loss’.
22
56. The claimants’ case, however, is that the judge went
wrong in answering the question he asked himself. The
primary focus of the argument is on para 66 of the
judgment, where the judge stated that ‘[h]aving considered
how the goods might have disappeared as a result of theft
to which an employee of UPS was party, it seems to me
more likely that they were lost accidentally: for example,
the packages were delivered to the wrong address by a
driver other than Mr Kadim; or that they were put into the
hub’s ‘overgoods’’. It is said that, although the judge
considered ho w the goods might have disappeared as a
result of employee theft, he did not consider how they
might have disappeared as a result of either of the two
accidental causes to which he referred. He made no
attempt to analyse the series of steps required for either of
those causes to have operated, or how his other findings
and the undisputed evidence impacted on the likelihood of
those steps having occurred. In fact, the cumulative
improbability is such that neither cause can be regarded as
plausible. The judge failed in this respect to take into
account relevant factors. In addition, the judge was wrong
in his assessment of the factors relevant to employee
theft: he overestimated the extent to which they made it
less likely and underestimated the extent to which they
made it more likely. On any reasonably complete and
balanced assessment, employee theft was more likely than
any other cause and was proved on the balance of
probabilities. The judge was therefore wrong to conclude
in para 68 that it would be too speculative to hold that the
goods were taken by or with the assistance of an employee
of UPS, and to state in para 69 that there was not proper
evidence to support the claimants’ allegation.
57. As regards misdelivery, the points made in support of
the implausibility of such a hypothesis are these: (1) The
driver would, mistakenly, have had to have taken the
packages to the wrong address despite the fact that each
package bore a typed label displaying the true consignee
and a unique UPS barcode: the judge found it improbable
that all three labels were damaged or that the barcodes on
all three were illegible (para 50). There was no separate
delivery plan and the drivers had to read the labels. (2) If
the label was legible, the driver would have been forced to
read it when deciding where and whether to deliver it. If
the labels had been illegible, the packages would have
been returned to the warehouse. (3) A coincidental
mistake would also have to have been made in respect of
23
the Axxis package which was due for delivery to L&A:
the judge found that the package was scanned ‘out for
delivery’ at the hub soon before its loss and it is therefore
highly unlikely that the label was defective. (4) The
chances of such a mistake being made in respect of four
separate packages in two separate consignments are even
less than in respect of the claimants’ three packages. (5)
The recipients would have had to make a similarly
unlikely series of mistakes in accepting the packages when
they were not the consignees named on them and had no
reason to expect delivery. (6) The driver would have had
to make further and coincidental mistakes in failing,
contrary to his training, to obtain proofs of delivery for
any of the packages. (7) As UPS’s expert witness,
Mr Heinrich-Jones, accepted in cross-examination,
recipients of misdelivered goods usually re-deliver them or
require them to be collected by the carrier. It is therefore a
further improbability that they would have held on to
them. (8) UPS called none of its drivers at the trial to say
that they had carried the packages, let alone that they had
misdelivered them or made such mistakes. (9) As the
judge found (at para 40), UPS was put on notice on the
day of loss that the claimants’ three packages were
missing. The claimants were told that they might have
been loaded in error onto another delivery vehicle, but this
was uncertain because some vehicles had not returned to
the hub. Mr Kadim also suggested the same day that
inquiries be made of other drivers. It is to be inferred that
UPS contacted the returning drivers while their memories
were still fresh and that no-one could recall these packages
having been delivered or misdelivered. The fact of early
inquiry and investigation makes the hypothesis of
misdelive ry even more remote.
58. As regards the overgoods area, Mr Reeve submits that
there is uncertainty about the judge's precise hypothesis
but that he was probably contemplating the possibility of
loss from the overgoods area. In any event the points
made in support of the implausibility of a hypothesis
involving the overgoods area are these: (1) On the judge’s
findings and the undisputed evidence, the overgoods area
is a secure area – ‘a locked cage’ (para 22). It would be a
non sequitur to suggest, without further analysis of how
the security might have failed, that an accidental loss from
the overgoods area was plausible. (2) As the judge held
(also at para 22), goods placed in the overgoods area were
the subject of inquiries and investigation to see if they
24
could be delivered or returned; and it was only if they
could be neither delivered nor returned that they were
eventually sold at auction. In any event, goods sold at
auction would have been accounted for. (3) UPS did not
suggest, or call evidence to show, that there were any
weaknesses in the system in respect of the overgoods
area. (4) It was improbable that the packages went into
the overgoods area in the first place. If the packages had
been returned undelivered by one of the drivers, they
would have been scanned on their return to the warehouse
before they went into overgoods. There was no evidence
of any such scans. (5) Furthermore, since UPS had been
alerted before the drivers returned from their rounds on the
day of the loss, it is implausible in the extreme that the
three packages slipped into overgoods, past the staff
whose responsibility it was to ensure the proper treatment
of undelivered packages and despite the inquiries being
made on that day. (6) The loss of the Axxis package as
well as the claimants’ three packages adds to the
implausibility of the hypothesis of loss from the overgoods
area.
59. In relation to the above points, Mr Reeve also
emphasises the weight and size of the claimants'
packages. These were substantial packages and it would
have required a conscious decision to move them.”
43.
At paras 67 to 76, Richards LJ accepted the substance of
Mr Reeve’s criticisms. He said:
“67. In my judgment the case advanced by the claimants
has considerable force to it. There is sufficient evidence
about the three Datec packages and the surrounding
circumstances to enable the court to engage in an informed
analysis of the possible causes of the loss and to reach a
reasoned conclusion as to the probable cause. The fact
that the experts were unable to reach a conclusion of their
own does not preclude the court from reaching such a
conclusion on the totality of the evidence and in the light
of the findings of fact.
68. I think it particularly important that the packages were
recorded as reaching UPS’s hub and as being ‘out for
delivery’ on 26 July, and that they were identified by the
floor supervisor as being stacked behind a delivery
vehicle. Those established facts greatly reduce the scope
25
for uncertainty, and the inferences that can be drawn from
them as to the condition of the packages and in particular
as to their labelling assist in the assessment of the
subsequent fate of the packages.
69. I also think it important that there was detailed
consideration at the trial of all possible explanations for
the loss. It was not suggested that there might exist any
realistic possibility that the experts had failed to canvass.
The court was in a position to look closely at the evidence
for and against each of the possible explanations. In
practice that could be done largely by reference to the
broad possibilities identified by UPS’s Mr van Beusekom.
70. In relation to those possibilities the judge gave
compelling reasons for finding, first, that the packages had
not been delivered to L&A (paras 49-53 of his judgment).
That finding did not depend on where the burden of proof
lay; and although the judge did not dismiss the possibility
that the packages had been delivered to L&A and mislaid
or stolen within L&A, he evidently and rightly considered
it to be unlikely. His finding was firmly grounded on
evidence not only about the Datec packages and UPS’s
delivery procedures, but also about L&A’s own operation
at Schipol.
71. The judge also gave compelling reasons for finding
that theft by a third party was improbable (para 59 of his
judgment). He dealt only briefly with third party theft
from the hub itself, concentrating on the difficulty of
gaining access without being recorded by the CCTV
cameras (as to which, see paras 23 and 42 of the
judgment). I would add that the overall security
arrangements at the hub, as summarised at para 14 of the
judgment, also militate strongly against the possibility of a
third party gaining access and removing the packages
undetected. As to theft by a third party from a delivery
vehicle, I agree with the judge that it is improbable - I
would say highly improbable - that a casual thief would
have found by chance a delivery vehicle left accidentally
unlocked (there was no evidence of any vehicle being
broken into), have picked out three packages of the weight
and size of these packages, and have removed them
without detection.
72. The two examples of accidental loss mentioned by the
judge at para 66 of his judgment were delivery to the
wrong address (by a driver other than Mr Kadim) and
placement of the packages in the overgoods area.
26
73. In my view the hypothesis of misdelivery is highly
implausible, for all the reasons given by Mr Reeve in his
submissions (para 57 above). It would require a most
improbable combination of events for the packages to
have been lost in this way, involving multiple errors by the
UPS driver, errors by the recipient and a subsequent
failure by the recipient to return the packages when the
mistake was detected. The fact that prompt inquiries
within UPS about the whereabouts of the packages
produced nothing to support this hypothesis is a further
factor telling against it.
74. The judge’s second example, of placement of the
packages in the overgoods area, provides an even less
plausible explanation for the loss. Again I agree with the
reasons advanced by Mr Reeve in his submissions (para 58
above). It is difficult to see how the packages might have
got to the overgoods area in the first place, given the
evidence that they had labelling sufficiently intact and
legible to be scanned ‘out for delivery’ and to be identified
by the floor supervisor. But if they had got to the
overgoods area, the strong probability is that they would
have been identified and delivered or returned or that they
would have been sold and accounted for. The system does
not admit of any sensible possibility of their simply
disappearing accidentally and without trace.
75. Although the judge referred to those two possibilities
of accidental loss as examples, there does not seem to me
to be any other realistic way in which packages of this size
and weight might have been lost accidentally, either from
the floor of the hub or from one of the delivery vehicles.
76. That leaves for consideration the possibility of theft by
one or more UPS employees. It should be noted at the
outset that there is nothing inherently implausible about
such an explanation: far from it. Although there were
only 18 cases of established theft from the Amsterdam
operation between 1998 and 2002, there was a large
number of losses the causes of which had not been
established (41 in July 2002 alone); and it would need
only a relatively small proportion of such losses to be
attributable to employee theft for the total losses from
employee theft to run into the 100s over the same period.
There was also evidence to support the view that the Datec
packages might be targeted for theft or identified as
containing high value items. Although there was no direct
information about their value on their labelling or
accompanying documentation, the contents were described
27
as ‘electronic components’. Moreover, L&A was known
to handle high value items of this sort, so that the delivery
address would have been significant to anyone ‘in the
know’. The experts acknowledged the possibility of
targeted theft by organised criminals and agreed that, if the
packages were stolen, it was probably a case of targeted
theft.”
44.
It is right at this point to say a word about Mr Kadim’s position,
although I agree with Richards LJ that it is not ultimately critical. The
judge in addressing Mr Kadim’s position treated four considerations as
casting “real doubt” on any contention that he had stolen the packages:
the fact that Mr Kadim went voluntarily to the police, the fact that it was
not obvious from the labelling and documentation that the packages
were particularly valuable (and there was no evidence that Mr Kadim
knew that they were, although it was “possible” that he did), the fact that
he did deliver one package to L&A on 26 July 2002 and the absence of
any convincing evidence that the packages were loaded on his vehicle.
Richards LJ commented:
“77. I am inclined to agree with Mr Reeve’s submissions
(para 60 above) concerning Mr Kadim’s subsequent
conduct and explanations to the police, and to place less
weight on them than the judge did. But the explanation of
employee theft does not depend for its cogency on putting
the blame specifically on Mr Kadim or on other otherwise
identifying the responsible employee or employees. The
explanation fits well with the known facts even though the
employee or employees concerned cannot be identified.”
I agree with Richards LJ’s comments. I do not regard either Mr Kadim’s
voluntary visit to the police, when he knew they were seeking to arrest
him, or his delivery of one package to L&A as any particular indication
of innocence. Mr Kadim’s statement (quoted in paragraph 35 above)
was also not that he was not on 26th July familiar with the Schiphol
South East route – all that is known is that this had not been his regular
route. But, as the judge said, the respondents’ case does not depend on
putting the blame on any specific employee of UPS. If Mr Kadim is
right in suggesting that another unscheduled UPS driver may have taken
these three (or presumably all four) missing packages for delivery, the
questions arise why this driver took the packages and why he never
delivered them.
28
45.
Mr Flaux for UPS submits that the Court of Appeal, in
concluding that employee theft was the relevant cause, paid insufficient
attention to the primacy of the judge’s findings, that it was lured into a
process of elimination (which could at best arrive a conclusion as to
which of many possible causes was the least unlikely, rather than a
conclusion as to any cause which was more probable than all the others
viewed together) and that, despite lip service to the need for clear and
cogent evidence, it found wilful misconduct when there was an absence
of any such evidence.
46.
As to the correct approach in an appellate court to findings and
inferences of fact made by a judge at first instance after hearing
evidence, there was no disagreement between counsel. In Assicurazioni
Generali SpA v. Arab Insurance Group [2003] 1 WLR 577, Clarke LJ
summarised the position, referring also to a passage in a judgment of my
own:
“14. The approach of the court to any particular case will
depend upon the nature of the issues kind of case
determined by the judge. This has been recognised
recently in, for example, Todd v Adam (trading as
Trelawney Fishing Co) [2002] EWCA Civ 509, Lloyd’s
Rep 293 and Bessant v South Cone Incorporated [2002]
EWCA Civ 763. In some cases the trial judge will have
reached conclusions of primary fact based almost entirely
upon the view which he formed of the oral evidence of the
witnesses. In most cases, however, the position is more
complex. In many such cases the judge will have reached
his conclusions of primary fact as a result partly of the
view he formed of the oral evidence and partly from an
analysis of the documents. In other such cases, the judge
will have made findings of primary fact based entirely or
almost entirely on the documents. Some findings of
primary fact will be the result of direct evidence, whereas
others will depend upon inference from direct evidence of
such facts.
15. In appeals against conclusions of primary fact the
approach of an appellate court will depend upon the
weight to be attached to the findings of the judge and that
weight will depend upon the extent to which, as the trial
judge, the judge has an advantage over the appellate court;
the greater that advantage the more reluctant the appellate
court should be to interfere. As I see it, that was the
approach of the Court of Appeal on a ‘rehearing’ under the
29
Rules of the Supreme Court and should be its approach on
a ‘review’ under the Civil Procedure Rules.
16. Some conclusions of fact are, however, not
conclusions of primary fact of the kind to which I have
just referred. They involve an assessment of a number of
different factors which have to be weighed against each
other. This is sometimes called an evaluation of the facts
and is often a matter of degree upon which different
judges can legitimately differ. Such cases may be closely
analogous to the exercise of a discretion and, in my
opinion, appellate courts should approach them in a
similar way.
17. In Todd’s case [2002] 2 Lloyd’s Rep 293, where the
question was whether a contract of service existed, Mance
LJ drew a distinction between challenges to conclusions of
primary fact or inferences from those facts and an
evaluation of those facts, as follows, at pp 319-320, para
129:
‘With regard to an appeal to this court (which
would never have involved a complete rehearing in
that sense), the language of “review” may be said to
fit most easily into the context of an appeal against
the exercise of a discretion, or an appeal where the
court of appeal is essentially concerned with the
correctness of an exercise of evaluation or
judgment – such as a decision by a lower court
whether, weighing all relevant factors, a contract of
service existed. However, the references in rule 52.
11 (3) (4) to the power of an appellant court to
allow an appeal where the decision below was
“wrong” and to “draw any inference of fact which it
considers justified on the evidence” indicate that
there are other contexts in which the court of appeal
must, as previously, make up its own mind as to the
correctness or otherwise of a decision, even on
matters of fact, by a lower court. Where the
correctness of a finding of primary fact or of
inference is in issue, it cannot be a matter of simple
discretion how an appellant court approaches the
matter. Once the appellant has shown a real
prospect (justifying permission to appeal) that a
finding or inference is wrong, the role of an
appellate court is to determine whether or not this is
so, giving full weight of course to the advantages
enjoyed by any judge of first instance who has
heard oral evidence. In the present case, therefore, I
30
consider that (a) it is for us if necessary to make up
our own mind about the correctness or otherwise of
any findings of primary fact or inferences from
primary fact that the judge made or drew and the
claimants challenge, while (b) reminding ourselves
that, so far as the appeal raises issues of judgment
on unchallenged primary findings and inferences,
this court ought not to interfere unless it is satisfied
that the judge's conclusion lay outside the bounds
within which reasonable disagreement is possible.
In relation to (a) we must, as stated, bear in mind
the important and well-recognised reluctance of this
court to interfere with a trial judge on any finding
of primary fact based on the credibility or reliability
of oral evidence. In the present case, however,
while there was oral evidence, its content was
largely uncontentious.’
In the same case Neuberger J stressed, pp 305-306, paras
61 to 64, that the question whether there was a contract of
service on the facts involved the weighing up of a series of
factors. Thorpe LJ agreed with both judgme nts.”
The judgment of Ward LJ in the Assicurazioni Generali case may be
read as advocating a different test, which would equate the approach of
an appellate court to findings of fact with its approach to decisions taken
in the exercise of a discretion. As Waller LJ correctly pointed out in
Manning v. Stylianou [2006] EWCA Civ 1655, that is not the correct
test, and it is the judgment of Clarke LJ in the paragraphs quoted above
from his judgment that gives proper guidance as to the role of the Court
of Appeal when faced with appeals on fact.
47.
In the present case, the judge’s findings of primary fact have not
been challenged. One or two small points have been made on factual
matters, but they are of no or minor relevance and do not justify
Mr Flaux’s submission that the Court of Appeal exceeded its proper role
in reviewing the judge’s conclusions. Essentially, what have been in
issue have been the inferences with regard to the causation of loss to be
drawn from primary facts which are not in dispute. Mr Flaux, in my
view correctly, accepted this was a correct analysis of the central issues,
when opening the appeal. I note in parenthesis that Richards LJ appears
to have treated as applicable the steeper appellate hurdle that would
have applied if the appeal had been related to an evaluation or judgment
or a decision analogous to the exercise of a discretion; even so he
arrived at the conclusion he did on the basis that the judge had in his
31
paragraph 66 failed to take into account relevant considerations; in
particular the judge had failed to follow through the two examples he
gave of accidental loss and to consider what each involved and how
plausible each might be (cf paras 85 to 87). I do not disagree with
Richards LJ’s latter comments, but in my view the situation is one
where an appellate court is well placed and entitled to re-consider for
itself the judge’s findings as to what should or should not be inferred
regarding causation from the primary facts which he found.
48.
Nor do I accept Mr Flaux’s submission that Richards LJ was
lured, by a process of elimination, into accepting as the probable cause
the least unlikely of a range of possibilities all of them unlikely. That
was the error the House identified in the approach taken by the judge at
first instance in Rhesa Shipping Co SA v. Edmunds (The “Popi M”)
[1985] 1 WLR 948. The reasoning of Sedley LJ in the present case may
be open to criticism both for suggesting that sufficient was known for
the court to base its conclusions on the least improbable cause and for
doing this. But that of Richards LJ, with whom Brooke LJ agreed, is not.
49.
Richards LJ summarised his conclusions as follows:
“79. Looking at the matter overall, it seems to me that the
judge did overstate the factors telling against employee
theft and understate the factors telling in favour of it. I
consider employee theft to be a much more likely
explanation than the judge found it to be. Perhaps more
importantly, I regard as implausible and improbable the
explanations of accidental loss to which the judge referred
when concluding that accidental loss was more likely than
employee theft.
80. If conducting the exercise of evaluation for myself, I
would conclude that theft by one or more UPS employees
was the probable cause of the loss and that the claimants'
case had therefore been proved on the balance of
probabilities. That conclusion would lead in turn to a
finding of wilful misconduct within article 29 of the CMR
and the consequential disapplication of the limit imposed
by article 23 on UPS’s liability. (I should mention, for the
sake of clarity, that I agree with the approach of Andrew
Smith J at para 68 of his judgment towards In re H
(Minors) [1996] AC 563 and its application to the standard
of proof in this case. In the circumstances the burden on
32
the claimants to prove their case is not a particularly heavy
one.)
81. My conclusion does not depend on the separate loss of
the Axxis package, but I accept the submissions by
Mr Reeve that the loss of the Axxis package adds to the
improbability of other possible causes and makes
employee theft all the more probable.
82. I have borne very much in mind the observations of
Brooke LJ in Lacey’s Footwear (Wholesale) Ltd v Bowler
International Freight Ltd [1997] 2 Lloyd’s Rep 369 with
which I am in respectful and total agreement, as to the
need for a properly rigorous approach to the available
evidence. It is the evidence, properly analysed, which in
my view leads to the conclusion. That is also why I
disagree with the judge’s description of the claimants’
case as ‘too speculative’”.
50.
I find the reasons given by Richards LJ for reversing the judge
compelling. None of the possibilities mentioned by the judge in para 66
affords any plausible explanation of the disappearance of the three
packages, still less of all the four that were due for delivery to L&A on
26th July 2002. In their joint memorandum the two experts were in fact
agreed that the possibilities of loss, Missorted, Mislaid and
Damaged/thrown away/sold at auction, under head I were each “less
likely than others”, in view of the sighting of the packages by
Mr Karbouche correctly stacked and labelled on the spur shortly before
loading. None of these possibilities anyway offers any comprehensible
explanation for the disappearance of three (or in fact four) large and
valuable packages. The possibilities, Mis-delivered and Delivered in
error, under head II run up, as previously stated, against the inherent
implausibility of three or four separate packages due for delivery to
L&A all being innocently misdelivered on the same day without any
DIAD signature being obtained from anyone. The possibilities floated
before the judge (but not even mentioned by him in his paragraph 66)
under head II, Labelling issues, are remote in the extreme for the reasons
given in paragraph 27 above. As to head IV, Theft, the joint
memorandum categorised all the possibilities as “less likely”, except for
those involving a UPS driver or employees, and the judge found that, if
the packages were stolen, it was probably by a UPS employee.
Inevitably, any systematic consideration of the possibilities is subject to
a risk that it may become a process of elimination leading to no more
than a conclusion regarding the least unlikely cause of loss. But, as I
have said, I do not consider that Richards LJ fell into that trap. I share,
without hesitation, the view which he formed overall that theft involving
33
a UPS employee was shown on a strong balance of probability to have
been the cause of this loss.
51.
In agreement with the reasoning of the majority contained in the
judgment of Richards LJ in the Court of Appeal, I would therefore
dismiss this appeal.
LORD NEUBERGER OF ABBOTSBURY
My Lords,
52.
I have had the privilege of reading the draft opinion of my noble
and learned friend Lord Mance and agree that this appeal should be
dismissed.
34